by Natasha Gabrielle | May 8, 2021
Many or all of the products here are from our partners. We may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
Are balance transfer cards or personal loans the best way to tackle your debt? We'll explain the pros and cons of each option to help you decide.
If you have a significant amount of debt, it can make everyday life stressful. It may feel like you're never able to get on top of your finances. This is especially true if you don't know how to pay off debt.
The good news is that there may be options available to help you get out from under your debt. The challenge is finding the solution that best fits your needs. Keep reading to learn about two options available to help you pay off your debt faster: Balance transfer credit cards and loans.
Tips and tricks from the experts delivered straight to your inbox that could help you save thousands of dollars. Sign up now for free access to our Personal Finance Boot Camp.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
A balance transfer credit card is a type of card marketed toward people who want to transfer their existing credit card debt to a new card. These cards usually have much lower interest rates than standard credit cards. In fact, many of the top balance transfer cards have no interest at all for a certain length of time. These types of cards can make it easier for people to pay off their debts in a more affordable way.
When looking for a new balance transfer card, be sure to look for one with a 0% APR rate. This promotional offer is typically only available to new cardmembers, and the promotional rate will be valid for a limited time only.
Here are the pros and cons of using balance transfers to pay off your debt.
Another financial tool that you can use to pay off your debts is a loan. This option is useful for when you need cash to pay off a lump sum of debt. When you take out a personal loan, you'll repay the debt in fixed monthly installments. You can use the cash from your loan to pay off your high-interest debts and then make payments on the loan until it is paid off.
Similar to balance transfer cards, there are pros and cons to using personal loans to pay off your debt.
You'll have to think carefully when deciding whether a balance transfer credit card or a personal loan is the best way to tackle your debt issue. The answer won't be the same for everyone.
A personal loan may be a good option if you're able to get a loan with a low-interest rate. You should figure out the total cost of the loan before agreeing to go this route.
To help you determine what is a good interest rate for a personal loan, calculate the total interest costs over the life of the loan and check the loan origination fee to figure out how much you'll be paying for your new loan. This may be a good option for more significant amounts of debts that you might not be able to pay off in a few months or a year.
On the other hand, a balance transfer credit card may work better for your needs. Always check to see what the balance transfer fees are for a particular card before going this route. You should also check on the promotional interest rate timeline and get a card that offers 0% interest. You'll need to make sure that you can pay off the total transferred balance before the promotional period runs out, or you'll be charged additional fees. For more information, be sure to check out our guide to learn more about how credit card interest works.
Here's how to decide what will be best for your debt repayment needs:
Considering the above can help you determine the best strategy for your needs. Make sure that you create a debt payoff plan and stick to it to avoid racking up more debt and avoid unwanted extra fees.
Debt can be overwhelming, but with patience, hard work, and a solid plan, you can pay off your loans and high-interest credit cards and get ahead again.
If you struggle with money matters, check out our personal finance resources to learn other money management tips.
If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.